Economics at your fingertips  

CEO age, shareholder monitoring, and the organic growth of European firms

Giorgio Barba Navaretti (), Davide Castellani () and Fabio Pieri ()
Additional contact information
Giorgio Barba Navaretti: University of Milan, and Centro Luca d’Agliano
Davide Castellani: University of Reading

Small Business Economics, 2022, vol. 59, issue 1, No 17, 382 pages

Abstract: Abstract The question of why some firms grow faster than others is of high theoretical and practical importance. Beyond a wealth of studies based on stochastic models, firm growth has mostly been explained by looking at the structural characteristics of firms, sectors, and countries. The role of managers’ characteristics in fostering firms’ growth has been explored much less. In this study, we adopt one key characteristic of managers, the age of the chief executive officer (CEO) and examine its relationship with the firm’s organic growth. Using data from a large sample of European manufacturing firms, we find that firms managed by young CEOs grow faster in terms of sales and assets, but not in terms of profitability. These results hold with the inclusion of a large vector of firm and CEO characteristics, and a battery of robustness checks, including issues related to the time horizon and appointment of CEOs, the educational attainment of younger cohorts of managers, and endogeneity. We hypothesize that young CEOs are incentivized to boost firm growth to signal their talent in the managerial market and to secure a longer stream of future compensation benefits. To the extent that firm growth does not translate into higher profitability, this may create an agency problem, due to the divergence of this corporate strategy from shareholders’ targets. In line with this hypothesis, we find that a more concentrated ownership that allows for more effective monitoring moderates the relationship between CEO age and firm growth.

Keywords: Chief Executive Officer (CEO); CEO age; Organic growth; Agency theory; Concentrated ownership; European manufacturing firms (search for similar items in EconPapers)
JEL-codes: G32 G34 L11 L25 L60 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/11187/PS2

DOI: 10.1007/s11187-021-00521-5

Access Statistics for this article

Small Business Economics is currently edited by Zoltan J. Acs and David B. Audretsch

More articles in Small Business Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2022-12-02
Handle: RePEc:kap:sbusec:v:59:y:2022:i:1:d:10.1007_s11187-021-00521-5